Build More Properties with Less Cash | Expert Strategies from Dynamo Capital

Nicholas Battaglia (00:00)
I work for a company called Dynamo Capital. We are a direct lender, and what we do is we provide loans, investment loans, to real estate investors— whether it be somebody’s very first fix and flip, to somebody that’s a very experienced developer that’s doing maybe like a 20, 30 townhome unit development project, or they’re doing land acquisition and selling lots off to national builders.

Joseph Crooms (01:54)
Hey everyone. Welcome to Investor Fuel Real Estate Pros Podcast. I’m your host, Joseph Crooms, and today I’m joined by someone I’ve been looking to forward to chatting with. His name is Nicholas Battaglia, who’s been making some serious move in the luxury loan business. And so I’m gonna allow him to explain and talk to that about that a little more. Hey Nicholas, glad to have you here. Say hello.

Nicholas Battaglia (02:23)
Hey Joseph, thank you so much for having me today. I’m very excited to be here.

Joseph Crooms (02:26)
Great, great. I think our listeners are going to really take something away from how you’re approaching business, especially on something that you mentioned to me called the LTC. Can you do two things at once? Can you for— first, for people who are not familiar with your world, give us the short version— what’s your main focus these days and what market you operate, and then go into the LTC. Tell us how that works.

Nicholas Battaglia (02:52)
Absolutely, I’d be more than happy to. So, Joseph, to— to start, my name’s Nick. I work for a company called Dynamo Capital. We are a direct lender, and what we do is we provide loans, investment loans, to real estate investors— whether it be somebody’s very first fix and flip, to somebody that’s a very experienced developer that’s doing maybe like a 20, 30 townhome unit development project, or they’re doing land acquisition and selling lots off to national builders, or people that are doing single-family homes, especially in the luxury space. And that’s a bit of a niche that I’ve carved out for myself here in the Nashville market. So I cover Nashville and all of Tennessee for Dynamo Capital.

And how we really differentiate ourselves is we actually offer, as you’ve alluded to, is 100% LTC financing for ground-up new construction, which I’m not familiar with any other lenders that like to give that maximum LTC out to their investors. So what that means is that we’ll actually give 100% of the purchase price for an existing home or an existing lot, and then we’ll also give 100% of the construction budget— all day-one financing for that— for that purchase, hold back the construction at 100%. And if there’s wiggle room in the deal, if the ARV supports it, we’ll even build in an interest reserve for the clients.

Joseph Crooms (04:11)
You’re throwing out quite a few acronyms. You know, LTC, can you tell me what that stands for?

Nicholas Battaglia (04:18)
Absolutely. So, Loan-to-Cost. So your total cost, what is the percentage of the loan that we’re giving you? So a hundred percent means we’re covering a hundred percent of your cost. Like I said, that acquisition of the land and the construction budget, when you combine those, that is your total cost. And we’re giving one hundred percent of that total cost to the investors.

Joseph Crooms (04:38)
How is your business doing in the last— say, how long have you been in business, first of all?

Nicholas Battaglia (04:43)
So I’ve been in the— in the private lending space for probably about— probably about a year now. And I came over from a more traditional asset management role in a— in a finance position, but always had a passion for real estate and had an opportunity to come and build a ground-up for the business here. So I kind of jumped at that opportunity to— to be able to do real estate investment loans, and it’s been unbelievably well. And I’ll give you a number: last month we were able to do $15.8 million in loans originated in the month of June, and almost all of those were at a hundred percent financing for our clients.

Joseph Crooms (05:19)
And how long have you been operating at that level?

Nicholas Battaglia (06:10)
Yeah, I’ve been at that— this level for probably— probably a couple of months now. You know, it— it takes a long time to be able to build your book of business, build your network, start reaching out to people. So we’ve got the ball rolling a couple of months ago. We’re full steam ahead and we’re probably gonna do similar volume this month and next month.

Joseph Crooms (06:26)
Right. What’s been the key to keeping your machine running smoothly now?

Nicholas Battaglia (06:31)
Hmm. I gotta give a really big shout-out to my processors and my underwriters— without them, I wouldn’t be able to do my job properly. So my job is to go out into the field, meet all of the developers that we’re working with, and bring in the business. But that ship couldn’t move forward if we didn’t have a crew at the helm there that’s able to steer it in the right direction, help me onboard our clients, make sure that the projects make sense, kind of, you know, cross the T’s, dot the I’s from an underwriting perspective, make sure that they’re— that we’re all squared away there, and then go ahead and actually do the operational portion of being able to close the loan. So my— my processing team and my underwriting team, they’re my— my right-hand men and women, and they’re absolutely fantastic to work with.

Joseph Crooms (07:13)
Because you shared with me something about the stages of— of— of investment that are ready to go, per se. And you said that the— the middle stage is a little more complicated. Can you give me the price range, high, low, and the bottom, and tell me why that middle lane is so— so difficult now?

Nicholas Battaglia (07:36)
Yeah, absolutely. So I— I think that the way that I’ll phrase this is: what products are actually selling in the Nashville area? Because as a real estate investor, one of the most important things is your exit strategy for a project, right? Because you got to be able to pay me, your lender, back, and you want to make a profit. So you have to pick a product and an asset class that’s actually going to sell on the back end, or something that you’re going to be able to refinance into a long-term hold. So very specifically in the Nashville market right now, we’re seeing kind of what I call… like if you ever hear economists talk about the broader economy, they use the term like the “K-shaped economy,” where the top is going really high and the bottom is going really fast and low, but that middle section is kind of unaccounted for.

So in the Nashville market, what I’m seeing is that inventory that is priced between maybe five hundred thousand dollars to a million dollars is really oversaturated. We have probably about two years’ worth of inventory in Nashville at that price point for single-family homes and townhomes, so they’re having a really, really hard time selling. And I’ve even seen six— single-family homes just outside of Nashville that have been on the market, brand-new construction— and they’re beautiful, I’ve walked them— that have been sitting on the market for— for over a hundred and ninety days at this point. But if you look at things under five hundred thousand dollars, they’re selling really quick. And then over a million dollars, we’re having a lot of cash buyers come in.

Nashville is— is a booming town. Tennessee was rated, I think they just released that it has the second-best economic outlook of any state in the country. And a lot of that is because we’re having many corporations move here— your Starbucks, AllianceBernstein, Oracle, In-N-Out Burger— a lot of these companies are moving here, and their C-suite level executives are having cash purchases for these luxury homes over a million dollars. So they’re moving pretty fast— maybe 30 to 40 days on market is— is typically what we’re seeing there. So that’s kind of what we’re seeing in Nashville right now, what’s selling and what’s not.

The one caveat that I’ll put to that is that if people are building properties that are in that $500,000 to a million-dollar price range, the exit strategy that does work for that is to actually put a DSCR loan on it and how— hold them as rentals instead. Because Nashville still has a hundred people moving here per day, if not more, so the rental demand is really strong, but people aren’t buying those homes. So if you have your exit strategy to hold it as a— as a long-term rental and you do a build-to-rent strategy, that’s a place that I’m seeing a lot of investors have success as well.

Joseph Crooms (10:01)
And DSCR, another acronym that you give. Share— tell us what that means for the audience.

Nicholas Battaglia (10:07)
Yes, sir. That’s your Debt Service Coverage Ratio. Basically what that means is that that property is bringing in more than you’re putting out in terms of your mortgage, your taxes, your insurance on a monthly basis. Make it— that’s— that’s your cash flow analysis. Is this cash flow positive or is this cash flow negative?

Joseph Crooms (10:58)
And so with all these rental potential properties, how— how is that mark— how do you present yourself to say, “Listen, there is an alternative”? How do you present that to— to— to— to a client?

Nicholas Battaglia (11:12)
Yeah. So I— I would say that most of the clients that I work with kind of have an idea of what they want to do. And my job as— as their lender is to either steer them in the right— or the steer them in the right direction, make sure they’re not going in the wrong direction. So if somebody comes to me and they say, “Hey, I want to build ten— ten single-family properties in this area of town and the price point is gonna be like five hundred to six hundred thousand on the exit strategy, and we’re just gonna sell them,” it’s my job as their lender to step in and say, “Hey, listen, like, did you do a market analysis here? How confident do you feel that you’re gonna be able to sell those?” Because right now I’m seeing products in that price point that are sitting on market for 90 days and I don’t want— or 190 days, and I don’t want you to get stuck in that. And I’ll say, “If you’re planning on building that, if you already got the land and that’s what you want to do with it, maybe we tweak the strategy a little bit because I’m seeing a lot of success in build-to-rent. Why don’t we move down in that direction and I’ll help you get your rental loan when you refinance out of the construction loan at the exit of that pro— project.” My— my number-one goal is to always make sure that my clients that I work with have a proper exit strategy. They’re making money, I’m making money, and none of us are taking on added risk that we don’t need to do.

Joseph Crooms (12:22)
That sounds amazing. So, now every operator I know has a moment when things just got real, or a deal that may s— go sideways or a time they had to pivot fast. Do you mind sharing one of those moments or a couple of those moments with us?

Nicholas Battaglia (12:37)
Yeah, absolutely. I mean, I’ll give you an example, and as— as a lender, one of my— one of my biggest heart-drop moments that I have is any time that I get an appraisal back, because an appraisal can really make or break a deal. And I’ve been really fortunate in the luxury space here— we’ve had a couple of appraisals come back last month that were a million dollars over what the investor was expecting to get for the property on the sale. So that’s tremendous when that happens. We can all have a big smile, you know. That investor is going to make an extra million dollars on their profit on the back end for some of these luxury deals. At the same time, if an appraisal comes back low, that can really kill the deal because we have certain qualifications for lending, that we will not give a loan that is more than 75% of that ARV, that After-Repair Value. So if that ARV value comes back low from the appraisal, and then we’re having to lend more than what that percentage is, we actually can’t proceed with that deal. So it can make a deal go sideways very quickly.

Now we have a couple of things that we can do for that. We can go ahead and we can request from the appraiser— call an ROV, a Revision of Value. And we say, “Hey, listen, you use these comps, you might have left out some square footage here. Do you think we can go back and can we revisit this? And we think these comps are more accurate. This is the square footage that this— that this property should have.” So oftentimes we can work with an appraiser to help them kind of get the whole picture of that project, what’s going on, and maybe have a more accurate valuation than what was originally given to us. And sometimes they say yes, sometimes they say no, and unfortunately that can be a deal killer. And I experienced this just last week with a deal that we would have loved to have done, but the appraiser said, “Hey, listen, when you go to sell this property, it’s 500,000 less than what you thought you were going to be able to sell it for.” And it’s my job as the lender to say to my client, “Hey, listen, like, we’re already giving you a really big loan here. That’s not going to be profitable for you to do this deal.” And I would rather have my— my client maybe spend a thousand dollars on the appraisal, whatever it might be, and find out that this deal is not correct, than go ahead, proceed with the project, and then lose a lot more money on the back end.

Joseph Crooms (14:40)
Do you— what is some of the reasons that the property may lose the— on appraisal value— value?

Nicholas Battaglia (14:46)
Yeah. Well, I would say one of the most important things is, as an investor, you’re gonna be working with— with a realty team. You’re gonna have a— a real estate agent that’s gonna help you, and for the most part, they’re really good at picking out like comps that are going to support what your project is. And sometimes people get a little too bullish— they’re a little too aggressive in what they think they’re able to get, and maybe a little bit too optimistic. So my— my advice to anyone is: find like comps. If you’re planning on doing a fix and flip project, your comps should not be a new construction project. New construction typically holds its value a lot better and you pay a premium for the new construction. So if you’re basing your ARV off of a new construction comp, that’s probably not accurate. So it’s better to take the time and due diligence period to find those really good comps that are accurate so that you know when you come to me with a project, you’re not gonna be surprised when an appraisal comes back because you did your due diligence and you found something similar to compare it to.

Joseph Crooms (16:27)
Well, Nicholas, it sounds like you really done your— your homework and you really try to inform your clients to give them great advice. Wha— what— how is your— what is your volume from when you started in the middle and now?

Nicholas Battaglia (16:40)
Sure. So, I mean, when I first started as a lender, I came from— from the finance industry, from— from asset management. I actually didn’t have any experience in the real estate industry, so I— I won’t lie, it took a couple of months for me to ramp up. There were a couple months where I put up a— a couple of zeros for my— for my commission and for what I was doing. But you know, when you have to learn an industry, when you have to go into a— a new room and introduce yourself to new people and you— you know absolutely nobody, it takes— it takes a lot of time to actually build up that— that clientele. So I’m very open that I think maybe the first two or three months that I was in my role, I probably didn’t close any loans. I met a lot of people and I learned the industry and I put my head down and focused on what I need to know to be a successful lender and to be able to provide the best services to my clients.

So after that, I probably started averaging maybe like two or three million a month is— is probably like fairly accurate for, I don’t know, maybe like six to eight months there. And then probably within the last two to three months is where I really started to have the ball roll significantly faster and get to probably ten million-plus months, and we’re looking at kind of keeping that train going in the right direction and— and hold on to that volume. But it takes a long time to get there— you have to build the clientele, you have to learn the product, you have to be able to give the advice that those clients need to be able to be successful.

Joseph Crooms (17:58)
Thanks for sharing that. That’s the kind of stuff people don’t talk enough about. And honestly, it’s what separates those who dabble from the ones who study in the long term. Let me ask you this: what are you most focused on solving or scaling next? What’s your next real goal?

Nicholas Battaglia (18:16)
So, my next goal… I work with a lot of luxury developers in town, like I mentioned, and my goal is to help them scale their businesses. Now, the way that I’m looking forward to doing that is because traditionally on ground-up construction, most lenders go at 90 LTC— so 90% of that total cost is what they’re willing to lend. And with that, if you’re taking out a $3 million loan, you might be coming to the table with four or $500,000 to be able to close a deal like that. That’s a lot of money that is out of your pocket that’s tied up for the next 12 to 18 months as you do that project. What I help people unlock is the leverage to be able to keep more money in your pocket. ‘Cause if I can close the same loan for you for a hundred thousand dollars or less— which is realistic with what I’ve been doing with all of my clients— that means that you can go and do three or four projects all at the same time, as opposed to having all of your money locked up in one project. So that’s what I’m looking forward to doing— is now that I have the ear of all these luxury developers, I can’t wait to help them grow and scale their business from maybe doing two or three luxury builds a year to doing ten to fifteen luxury builds a year.

Joseph Crooms (19:24)
Well, that’s especially when you got your business sorta foundated now and— and in place, that next move can either compound things or create chaos depending on how you play it. So—

Nicholas Battaglia (19:37)
That’s absolutely right. You ha— they have to have the teams and— and— and project managers and their support staff as well to be able to grow and scale at that capacity, because I don’t want them to go out over their skis either and get stuck with doing too many projects. So one of the things that I see a lot of them do, and I spoke with one of my— my favorite clients, Jador Luxury Builders here in Nashville earlier this week, and they were interviewing 15-plus project managers to help grow and scale their business. So when they— they said to me, they’re like, “Nick, this is a fantastic product— product. We can’t wait to do more and more. We need to internally scale so that we can grow with you now.” So it’s a very important thing that if I’m gonna help you grow and scale, you gotta have the back-end plumbing in your business to be able to do that as well.

Joseph Crooms (20:21)
Amazing, Nicholas. Now I know a lot of people listening are either early in their journey or looking to level up, and you truly can speak to both. I think that they’re different from hearing this. When it comes to building relationships and growing your network, what’s made the biggest difference for you?

Nicholas Battaglia (20:40)
Absolutely. So I like to say I’m— I’m an Italian guy from New Jersey originally, and I am very much a handshake, let’s grab a coffee, let’s get to know each other before we do any business together— figure out if personality-wise we match. I like to think that I— I do well with most people. My advice to— to anyone that’s starting off, whether you’re a— a— a— a first-time fix and flipper, a very experienced developer, the biggest thing is real estate is a relationship business. I have gone to every single networking event in town to meet everybody. My job is to go to as many of those events as possible and know everyone. So when someone has a need— if it’s their first-time fix and flipper and they’re like, “Nick, how do I build out a team?” I’m like, “All right, well, like, I got three general contractors that I would recommend that do fix and flip, I’m gonna introduce you to all three of them.” You need acquisitions, you can’t find any deals… I work with two or three different wholesaling groups in town— let me make those introduction— introductions for you.

Be in person, show up to all the events, pick up the phone and call people, and build relationships. There’s been plenty of times where I haven’t— I met someone at an event, I gave them my card, we had a good connection, and I grabbed coffee with them the next week. I follow up with them a couple of times, but they’re busy and I don’t hear from them for six months. And then I get a random phone call, “Hey Nick, I remember we met six months ago. You’ve left a good impression that time that we grabbed coffee. I’m ready to do my first project now. Can we talk?” So that’s the most important thing is get out there and build the relationships because your team is very important. You cannot do real estate investing by yourself— you need to have the trusted individuals that you meet in all different facets of the industry to be able to support your business to grow and scale. I’ve had so many people try to go from one to two fix and flips to doing 10 at a time, and it’s like, I’m relying on just one general contractor or just one wholesaler to find me deals and they can’t scale. You gotta have a team behind you, you gotta have a couple of backups and you gotta know as many people as you can, or have a team that knows a lot of people that can make introductions for you.

Joseph Crooms (22:45)
Yeah, you can’t fake that. Relationships are everything in this space. All right, before we wrap up, Nicholas, and I wish we had so much more time to talk to you, if someone wanted to reach out, connect with you, maybe collaborate or learn more about what you’re doing, what’s the best way to reach you?

Nicholas Battaglia (23:02)
Absolutely. There are— there are multiple ways to do so. You can reach me at my email, n.battaglia— it’s B-A-T-T-A-G-L-I-A— @dynamocapital.com. You can reach me on Instagram at @loan_rider_. I say that because I’m a big motorcycle guy and I always show up to the job sites and the networking events on my motorcycle, so it’s kind of been the— the nickname that I’ve got is the Loan Rider. My slogan is “Ride fast, fund faster.” So you can find me on Instagram there, reach out to me via email or go to dynamocapital.com and we have like an inquiries page there. Any— any of those avenues is a great way to get in touch with me.

Joseph Crooms (23:44)
Nick, you mind running the tune one more time just for somebody to make me a flicking for a pit?

Nicholas Battaglia (23:48)
Absolutely. Email is n.battaglia— it’s B-A-T-T-A-G-L-I-A— @dynamocapital.com. Instagram is @loan_rider_. Or go to dynamocapital.com. Any way that you get in touch with me there, we’ll make sure to get back to you as quick as we can.

Joseph Crooms (24:11)
Perfect. Well, listen, I appreciate your time, your story, your philosophy, your perspective, and how you are moving aggressively to fulfill your dreams and fulfill your plans. We need more people in this space who are doing the right— the things the right way. Thanks again for being here, Nicholas.

Nicholas Battaglia (24:34)
Thank you. Thank you for having me, Joseph, it’s my pleasure.

Joseph Crooms (24:37)
For those of you tuning in, I know you got value from this. Make sure you subscribe. We got more conversations coming from operators just like Nicholas Battaglia. And did I click— got that last thing correct?

Nicholas Battaglia (24:45)
That’s— it’s a silent “G” there. It’s— the Italian names, we like to fool you. So, Battaglia.

Joseph Crooms (24:50)
Battaglia. And so thank you so much for correcting me. I got— you got value from this. Make sure you subscribe to this channel and we got more conversations coming from operators, just like Nicholas Battaglia.

Nicholas Battaglia (25:04)
There you go. There you go. You nailed it, Joseph.

Joseph Crooms (25:07)
Man, thank you, who are out there doing some— out there building real businesses, helping a lot of people. So thank you for being here. We’ll see you on our next episode of Investor Fuel Real Estate Pros Podcast. Hey, Nicholas, tell everybody you’ll see them soon.

Nicholas Battaglia (25:23)
Thanks, everybody. See you soon. Hope to hear from ya.